E-COMMERCE Knock-down, drag-out CPM vs. CPA (991 words)
Big and small publishers
There are two main classes of Web publishers: the big guys with lots of traffic and brands of their own, and smaller players that command less respect. Smaller sites may not have the critical mass or ability to sell their own ad inventory, and must either join an ad network or take whatever they can get. Perhaps performance deals make sense for advertisers here where the cost of buying on so many small sites is prohibitively expensive, but large, branded publishers are a different story.
Some middle ground?
The direct marketing industry has been able to track cells and response rates with tremendous accuracy for decades. So why hasn't postal mail evolved into a performance-based model?
The reason is it doesn't work for the publishers, who own all of the data. The industry has reached a stable pricing level that incorporates risk, branding, customer worth, honesty and size all embedded in the CPM price. The online industry will follow suit with more accurate pricing.
Perhaps current CPMs are too high for some advertisers, but CPAs are certainly too low. To bring advertisers to the table, publishers must continue to provide high quality ad vehicles and uphold online vehicles to the same integrity standards as off-line.
Publishers also have to realize that if advertisers do not sell product they cannot buy advertising. Advertisers, for their part, must accept a fair pricing model that compensates publishers for the full value of the advertising inventory.
While they may be able to cut a limited number of pure performance deals, those advertisers who want to achieve substantial volume and remarket penetration for their products will have to buy advertising with a CPM component.
Seth Lieberman is co-founder and chief executive officer of Focalex Inc., an e-mail marketing company. He can be reached via e-mail at firstname.lastname@example.org.